SABMiller Australian Revival May Wait as Profit Rises

By David Fickling and Clementine Fletcher -
Nov 22, 2012

SABMiller Plc (SAB), the world’s second-
biggest brewer, said its share of the Australian market may not
rise until 2014 after posting a 17 percent surge in first-half
earnings on gains in Latin America and Africa.

Earnings before interest, taxation and amortization climbed
to $3.17 billion, excluding some items, the London-based company
said yesterday. That beat the $3.1 billion median estimate of 10
analysts surveyed by Bloomberg and comes even as lager volumes
fell 13 percent in Australia, where SABMiller paid A$10.5
billion ($11 billion) last year for Foster’s Group Ltd.

Growth in emerging markets of Africa and Latin America, as
well as including earnings from the Foster’s deal, are helping
the brewer withstand rising costs and competition in China and a
slide in Europe. Since the Foster’s purchase, SABMiller’s
biggest ever, the company has lost its title as Australia’s
largest producer and its top-selling Victoria Bitter brand was
overtaken by Kirin Holdings Co.’s XXXX Gold.

“I don’t think we believe that share rebuild will be
rapid,” Chief Operating Officer Alan Clark said yesterday,
according to a transcript of an investor call. “It’s been a
long time in its steady decline. So it’ll take a long time to
build back.” Market share will level off in the year through
March 2014 and start to recover after that, Clark said.

SABMiller shares rose 6.4 percent in London yesterday, the
steepest advance since Oct. 6, 2011, to 2,801 pence. That values
the maker of Castle lager at about 44.7 billion pounds ($71
billion.)

Profitability across the group was boosted by cost savings
and acquisitions, offsetting higher raw-materials prices and
adverse foreign-exchange swings stemming from weakness of the
South African rand and central European currencies, the company
said.

Latin America

Group revenue rose 11 percent to $17.5 billion. Earnings in
Latin America, the company’s largest region, rose 15 percent in
the half, helped by selective price increases and savings from
more efficient purchasing, SABMiller said. Volume growth in the
region slowed in the second quarter amid weaker consumer
sentiment, the brewer had said last month.

Earnings in the Asia-Pacific region more than tripled to
$506 million on the Foster’s acquisition, and gained 10 percent
on an organic basis, SABMiller said. In Africa, earnings
increased by 8 percent, though growth was 19 percent excluding
acquisitions and currency shifts.

Europe Earnings

Ebita in Europe fell 10 percent, or 5 percent on an organic
basis, as higher raw-material costs and sales of cheaper drinks
weighed on profitability. Volume in the region rose 9 percent.

The Foster’s deal, completed last December, was intended to
give SABMiller “exposure to Australia’s strong economic growth
prospects” and a leading position in the local beer industry,
the company said in a regulatory statement last September.

Volumes in the country fell faster than that of the market
as SABMiller reduced its focus on the less-profitable mainstream
sales, the company said yesterday.

“The adverse trends within the beer and the alcohol
industry continue, exacerbated at the present by low consumer
confidence,” Chief Executive Officer Graham Mackay told
investors. Kirin also reported “tough market conditions” in
the country in third-quarter results Nov. 2.